When Did Harley Become Reliable Again
Now Harley-Davidson Is All Over the Road
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Apr 17, 1988
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Information technology is 1983 and Harley-Davidson Inc., the last surviving American maker of motorcycles, is begging the Authorities for assist. The 1982 recession has all only killed the motorbike market and Harley, leaking crimson ink, claims that the Japanese are dumping their excess inventory in American markets. The International Trade Committee agrees. It slaps Japanese companies with a 49 per centum tariff on big bikes, a tariff to be reduced over the next 5 years.
Skip ahead to 1986. Harley is in Washington once again - this time, not in supplication but in triumph. Its ii plants are humming along at elevation efficiency. Its bikes, despite $ten,000 price tags, are best sellers. And its income argument is comfortably swathed in black.
Remove the tariff a yr early, Harley suggests. Washington, with much hoopla, culminating in a personal visit past President Reagan to Harley's plant in York, Pa., willingly complies. Harley has been roaring profitably along ever since.
Just was the motorcycle tariff a good idea? Or did it, past raising the prices of Japanese bikes, deal a body-blow to motorcycling in this country?
No 1 disputes that the Japanese companies were dumping bikes. But, motorbike aficionados note, most of those bikes were and so-called ''touring'' bikes that appealed to riders who were unlikely to accept bought the huge, hateful-looking Harleys in the first identify. ''The Harley tariff took away the ability to find different types of motorcycles at reasonable prices,'' said Paul Dean, editor of Cycle World. ''And that did not do the motorcycle industry any good.''
Indeed, motorbike sales accept been declining in the land for two years. Office of that decline stems from the general crumbling of the population. But function may well be traced to the tariff. Harleys have always been too big and besides expensive to serve every bit entry-level bikes. And the tariff took many Japanese bikes out of range for beginners.
Harley is trying to turn the tendency effectually. The company has introduced a new model, with an 883cc motor, at the (for Harley) astonishingly depression price of $3,995. Whatsoever 883 owner who wants to buy a big, $ten,000 Harley within a twelvemonth can turn in the 883 and have the total purchase cost applied.
Only learning to ride a motorcycle by hopping on a Harley, even a Harley 883, would be like learning to fly in a 747. And unless people starting time out on less-powerful bikes now, there volition be no one to trade up to a i,340cc, the size of Harley'south mainstay bike, in the 1990'south. ''In many ways,'' said Mr. Dean, ''Harley shot itself in the foot.''
The sad thing, many say now, is that Harley did not accept to exercise it. Harley riders are a fiercely loyal group. Had Harley's reputation not already been tarnished, information technology is unlikely the Japanese bikes would take wooed many of its customers.
That is something even Harley dealers concede. ''People would have rather bought American; they just did not desire to purchase junior quality,'' said Oliver Shokouh, who owns the Harley dealership in Glendale, Calif. Michael J. Lombardi, the third generation of Lombardis to run Frank Lombardi & Sons Inc., Harley's Staten Island dealership, is but as blunt: ''I used to feel bad taking customers' money, the quality was then bad.''
Today, Harley executives acknowledge that Harley's troubles were internal. ''For years we tried to figure out why the Japanese were chirapsia u.s.a. then badly,'' said Vaughn L. Beals, Harley's tall, dapper chairman and primary executive. ''First nosotros thought it was their culture. And then we thought information technology was automation. So we thought it was dumping. Finally nosotros realized the problem was united states, not them.''
WHAT has helped Harley virtually in the concluding few years was not protectionism but greenbacks. In 1986 the company went public. Since then, Harley, which had profits of $17.seven meg on revenues of $685.four one thousand thousand last yr, has regained xl percent of the market place for over-850cc bikes, the merely kind information technology makes. It has a thriving business organization from parts and accessories, and from licensing its name for T-shirts, bags, even cigarettes. The licensing not just brings in nice fees, but ''it gives the states national advertisement that we could not afford to do,'' Mr. Beals said.
Mr. Beals has footling patience for chief executives who complain that Wall Street's clamor for quarterly profits saps the joy from running a public company. ''Sure, private is better when yous take cash, but public is a lot better when y'all don't,'' he said. ''Going public was a hard decision, but nosotros had such difficult financial problems it was the only determination.''
Harley has used its new-found financial health to develop hedges confronting the declining motorcycle market. Harley already has contracts to supply bomb casings for the military, to make computer peripherals and to machine components for Chrysler Marine, and Mr. Beals is placing a high priority on industrial business organization in the future.
Belatedly last year Harley acquired Holiday Rambler, a leading maker of recreational vehicles that gives Harley an ''in'' with people who experience they have outgrown motorcycling, or who prefer a family-oriented action. Vacation Rambler besides makes commitment vans, and just introduced the Utilimaster, a small walk-in van that uses a chassis made by Harley.
Harley'southward tactics have won it fans. ''They have kept a close eye to the bottom line, and accept improved their product, their processes and their marketing,'' said William D. Tichy, an analyst at Dean Witter Reynolds. James Schainuck, an analyst with Ladenburg, Thalman, said it short and sweet: ''Harley'due south on a curlicue!''
THAT Harley's success should follow going public is ironic. For this was Harley's 2d trip to the public well. And in many ways, its troubles began with its first trip.
To empathize that, one must look back to 1965. Harley, and then in operation for 62 years, had a niche that no other company could come up near. The BMW motorcycle was the Mercedes of the bike globe; the Triumph was the chief sporty model; Honda was known primarily for tiny bikes.
Just Harley - well, the Harley Pig, that was a motorcycle. There was nix delicate about it. It had big grips, big levers, big foot rests, a big engine. Information technology made a throaty, rumbling, threatening sound. It was the Harley Hog that Marlon Brando rode in ''The Wild One''; information technology was the Harley Pig that leather-jacketed bikers roared into boondocks on.
Few Harley riders did the sorts of unsavory things that were associated with motorcycle gangs. But they wanted to look as though they could. ''You lot pull up next to a guy in a station railroad vehicle and you're riding a Harley, that guy gives you respect,'' said Mr. Dean of Cycle World. ''If you were riding a Honda, he'd smile at you.''
By the mid 1960's Harley was making well-nigh 15,000 bikes a year, and had revenues of virtually $49 million. To grow larger than that, it needed greenbacks. So in 1965, it went public. And in 1969, at the meridian of the conglomerate era, Harley was bought past the American Car and Foundry Company.
A.M.F. (which in 1986 was captivated into Irwin Jacobs's Minstar Inc.) granted Harley's wish for growth. Past 1973 it was churning out 37,000 cycles a year and pulling in $122 million.
But Harley'south relatively unsophisticated pattern and production systems could not keep upward with that level of production. Quality plummeted, and labor relations deteriorated badly.
''A.G.F. was just virtually the ruination of Harley-Davidson,'' said Mr. Lombardi, the dealer. ''They had no quality control. They forced Harley to overproduce bikes, and they forced us to take them. It was a dictatorship.''
Yet such was the Harley mystique that dealers and bikers might have continued to willingly repair their leaky, unstable Harleys. But A.Grand.F. did the unthinkable: It insisted that its name, not Harley'southward, exist emblazoned on the bikes' fuel tanks. ''Harley people only refused to buy A.G.F. bikes,'' said Mr. Dean.
By the fourth dimension Mr. Beals joined Harley in 1975, the company'southward quality problems were formidable. So he went into high gear. He insisted that every Harley bike, not but a sample, be inspected as it came off the line. He changed the tests the company used. He elicited workers' suggestions for shoring up quality. And he asked A.M.F. for $80 meg to help Harley build a new blazon of engine.
A.M.F., which was trying to build its industrial businesses, refused to provide the money. So in 1981 Mr. Beals and 12 other Harley officers took Harley private.
By so, the Japanese had get a major force in the motorbike market. No longer content with selling tiny bikes, they were making 750cc and even larger motorcycles. In 1979 Honda opened its Marysville, Ohio, plant. Presently thereafter, that plant introduced the Gilded Wing, a 1,000cc bike that was designed exclusively for the American market, and that was only sold here.
The Gold Wing was as big as a Harley, yet was more comfy and reliable for long-distance traveling. ''The Gilded Fly created the luxury touring motorcycle market,'' said Roger Lambert, a spokesman for Honda of America Manufacturing Inc. It might sound like bombast - except that many analysts and motorcycle enthusiasts agree.
The new competition striking Harley at a bad time. It was saddled with $70 million in debt from the buyout, and it was hemorrhaging cash. Information technology lost $25 one thousand thousand in 1981 and $32 meg in 1982. ''There was not a segment of our concern that was not a challenge,'' said Richard Teerlink, who joined Harley equally its commencement principal financial officeholder in 1981 and today is president of its motorcycle division.
When the 1982 recession hit, Harley was close to going belly-upward. The next year the company asked for, and received, tariff protection. Just even as it publicly castigated the Japanese, Harley was trying to mimic them. Harley executives started touring Japanese plants to figure out what it was they did so well.
''We didn't run into any magic machinery,'' said Mr. Beals. ''But we did see companies without platoons of people or tons of parts around.''
Harley slashed its headquarters staff and adopted a version of Japanese Just-in-Fourth dimension inventory control in which suppliers evangelize quality-guaranteed parts that are used immediately rather than placed in stock. The new system reduced money tied up in inventory. But more important, it drove quality. ''If you have a continuous flow of parts and materials, you can't tolerate poor quality or machine maintenance,'' Mr. Beals said.
The button for quality continues at Harley. Its people are taking courses in statistical procedure command, a technique for enhancing quality and productivity. It has a new executive committee, consisting of Mr. Teerlink and three newly appointed senior vice presidents, that oversees operations, with special accent on quality programs. And information technology has monthly review meetings where people from all levels in the company make suggestions about how to better implement quality control and materials flow.
Now Harley must, as Mr. Beals put it, ''persuade the public that while our bikes still expect like Harleys, they no longer leak like Harleys.'' Throughout the 1980'due south Harley has been encouraging prospective buyers to test-drive Harleys - highly unusual in the motorcycle business because of the high cost of liability insurance. And in 1985 information technology increased its field sales staff by 50 percent, in order to help dealers implement the demo-ride program and other Harley promotions.
Most all of Harley'south executives are riders themselves, and most spend summer weekends at bike rallies. ''Routinely, we'll come up back and send notes to everyone in the visitor, reporting what customers say they want,'' said Mr. Teerlink.
SLOWLY but steadily customers are responding to the ''new'' Harley. When the California Highway Patrol, which stopped riding Harleys in the mid-1970's because they were unstable and leaky, switched back to Harleys in 1984, ''at that place was an uproar from every officeholder in the armada,'' said Edward Prieto, motorcycle training sergeant for the California Highway Patrol University. Today, many of the most vocal complainers have become ''die-hard Harley riders,'' he said.
Whether a new generation of motorcyclists will emerge remains a question. Beginner bikes remain scarce. Honda has introduced some new scooters and lightweight bikes that might attract first-time riders, only they are unlikely to take the same bear upon on motorcycling that the old Honda 50cc's and 90cc'due south did.
Yet, Harley dealers are banking that, even if the overall market place continues to reject, their share will remain high. About predict a stellar 1988, and few fear the 1990's.
Take Mr. Lombardi. In the 1970'south he had so little faith in Harley'south hereafter that he tried to sell his Staten Island dealership. He kept it only because he could not find a taker.
Terminal month, he closed the bike store he was running adjacent door. ''I want the infinite to evidence more motorcycles,'' Mr. Lombardi said. ''These days everyone wants our bikes.'' AT A GLANCE: Harley-Davidson All dollar amounts in thousands, except per share data Three months ended December. 31 1987 1986 Revenues $167,027 $72,211 Net Income four,881 1,271 Earnings per share $0.71 $0.22 Year ended Dec. 31 1987 1986 Revenues $685,358 $295,322 Net income 21,215 4,871 Earnings per share $3.27 $0.93 Full assets, December. 31, 1987 $380,872 Electric current assets 197,904 Current liabilities 133,682 Long-term debt 178,762 Book value per share, Dec. 31, 1987 $9.10 Stock price, Apr 14, 1988 N.Y.S.E. consolidated close 22 3/4 Stock price, 52-week range 26 i/ii-9 1/4 Employees, Dec. 31, 1987 iv,700 Headquarters Milwaukee
Source: https://www.nytimes.com/1988/04/17/business/now-harley-davidson-is-all-over-the-road.html
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